Lyft, Inc. (LYFT) stock has experienced volatility, particularly around earnings releases, though the stock has remained relatively flat over the last three months. Despite this, out-of-the-money put option premiums are currently elevated. Specifically, options with strike prices 8% lower than the current share price are yielding over 5% for a one-month period. As of January 12, 2026, Lyft’s stock price is at $19.61, having closed at $19.99 three months prior on October 13, 2025.
The company’s stock has reached highs of $24.57 on November 12, 2025, while maintaining a floor of $19.00 over the past three months. This volatility has fueled interest in put options. Analysts have noted that Lyft’s strong free cash flow (FCF) generation is a key driver. For example, on November 5, 2025, Lyft reported a trailing 12-month (TTM) FCF exceeding $1 billion – the first time this has occurred. Based on guidance for adjusted EBITDA margins between 2.7% and 3.0%, compared to 2.9% in Q3, FCF is expected to remain strong in Q4. This translates to a likely FCF margin of at least 16.4% for Lyft going forward, potentially 16.38% in Q3, according to Stock Analysis.
Using Seeking Alpha revenue estimates, analysts have calculated potential free cash flow. An estimated revenue of $6.38 billion for 2025, multiplied by a 16.4% FCF margin, yields a forecast of $1.05 billion in FCF for 2025. Similarly, an estimated revenue of $7.38 billion for 2026, at a 16.4% margin, projects $1.21 billion in FCF for 2026. This translates to an average of approximately $1.13 billion in free cash flow over the next 12 months (NTM). These projections then allow for the derivation of a price target (PT) for LYFT stock.
Price Targets (PT) for LYFT Stock. Currently, Lyft has a market capitalization of approximately $8 billion, according to Yahoo! Finance. This implies an FCF yield of around 12.5% – a calculation of $1 billion in LTM FCF divided by $8.00 billion in market capitalization. This yields 0.125, or 12.5%. Alternatively, this can be calculated by multiplying the estimated NTM FCF of $1.13 billion by 8 (1/0.125 = 8.0). If this NTM estimate of $1.13 billion in FCF is multiplied by 8, the resulting market capitalization is $9.04 billion. In other words, the price target is 13% higher: $9.04 billion / $8 billion today = +13% upside. Additionally, this means a Lyft stock price target (PT) is 13% higher than its current price.
The current price target is $22.16 per share, according to analysts. Yahoo! Finance reports an average PT of $24.21, Barchart’s mean survey PT is $24.31, and AnaChart’s survey of 24 analysts is $24.18, averaging $24.23 – a 23.6% increase compared to today’s price. These analyst projections indicate a significantly undervalued company. Consequently, the high out-of-the-money (OTM) put option premiums are attractive to short sellers.
Shorting OTM LYFT Put Options. For example, considering the February 13, 2026, expiry period (32 days from today), an $18.00 strike price put option, 7% below the current price, presents a midpoint premium of $1.00, yielding a one-month income yield of 5.55% ($1.00 / $18.00 = 0.055 = 5.55%). This benefit is available to a short-seller of this put contract, who receives $1,800 in cash or the ability to purchase 100 shares at $18.00 if the stock remains above $18.00 over the next month. This approach provides a 5% one-month income yield while awaiting a potential lower entry point. Furthermore, a more risk-averse investor could short the $17.50 strike price put, offering a midpoint premium of $0.87. This yields a 4.97% (0.87/17.50) one-month income yield. The breakeven point (B/E) for this option is $16.63 per share. This means that a short seller would not realize an unrealized loss unless Lyft stock fell 15.5 percent from its $19.68.
The bottom line is that a Lyft investor can generate income while also setting a potential lower purchase price. New investors can also generate a 5% one-month income yield while waiting to potentially buy LYFT shares at a lower price. Mark R. Hake, CFA, did not hold (either directly or indirectly) any positions in the securities mentioned in this article. All information and data in this article is solely for informational purposes. This article was originally published on Barchart.com